Market in a Minute: Nov 25-29, 2019
by Rich and Sheila Jamison
Equities rose with the Dow Jones, the S&P 500 and NASDAQ all recording new highs. The major averages gained enough before Thanksgiving to end well in spite of Friday’s pullback. The Russell 2000 trailed, but still reached its best level in over a year.
Ten of the eleven S&P sectors gained, with five of those up at least 1.0%. Energy, down by 1.6%, was the only loser as West Texas Intermediate crude oil fell $1.35 to $57.05/barrel, back below its 50-day moving average.
The yield on the 10-year US Treasury note edged up by one basis point.
Volatility, as measured by the CBOE’s VIX, also edged up, by 0.1 to 12.6.
Trade-related headlines continued pouring in during the early portion of the week. As we’ve become accustomed to, they did not introduce anything material into the discussion.
More notably, President Trump signed into law two bills aimed at curbing human rights abuses in Hong Kong. This prompted angry statements and strong condemnation by Chinese officials, but nothing more concrete. As of now, the new laws are not expected to disrupt ongoing trade talks seriously.
The second estimate of our economy in Q3 showed a 2.1% annual pace of growth. That is an upward revision of the 1.9% rate reported in October, but still slower than the 3.1% rate in 2019’s Q1.
Corporate Q3 profits declined 0.6%. The Federal Reserve's Beige Book reports that the economy grew modestly through mid-November amid solid consumer spending and an uptick in manufacturing. Data compiled so far for Q4 suggest the pace of growth will decelerate, due largely to a slowdown in business investment.
However, there were two Q4 bright spots. New-home sales rose in October at the fastest pace in 12 years. Durable goods orders rose a better-than-expected 0.6%.
Global economic data continued painting a gloomy picture. China's industrial profits decreased at the sharpest rate in eight years in October (minus 9.9%) while South Korea and Japan reported falling industrial production in October. Japan was particularly hard hit with industrial production off by 4.2% while retail sales tumbled 14.4% because of consumers front-loading demand ahead of an October 1 sales-tax increase.
However, the European Commission reports that economic confidence improved in November, with its sentiment index rising to 101.3 from 100.8 in October.
Meanwhile, Germany and France called for an overhaul of the European Union. German Chancellor Merkel and French President Macron proposed a "Conference on the Future of Europe" designed to make the EU more united and sovereign. They spoke of a two-year process to make the EU more democratic and less reliant on the type of backroom deal that led to the of the December 1 incoming European Commission’s appointment.
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